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DXY: Dollar forecast to drop 1% vs G10 over 0-3M – CitiBank

Analysts at Citibank, expected hte US dollar to decline against G10 currencies, by around 1% in a 0-3 month horizon and 4% over 6 to 12 months.  

Key Quotes:  

“The $ can fall when there is positive growth convergence (RoW growth outperforms the US, a la 2017) and negative growth convergence (US and ROW growth falls but RoW growth falls less).”

“In 2015, US growth retreated from 3.8% yoy to 1.3% yoy but Eurozone growth slowed down from 2.0% yoy to 1.8% yoy only. The dollar index fell from 100 to 93 in this period.”

“We expect the differential between US and EA growth to peak in 2Q this year. Growth outperformance may narrow from 2% to 1.8% in Q2 and further reduce to 0.7% in Q4, which may undermine the USD.”

“Our point forecasts show the $ around 1% weaker vs. G10 over 0-3m and around 4% weaker over 6-12m.”
 

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